Enter China’s Security Firms

Chinese private security companies are seeing an opportunity as the U.S. withdraws troops from Iraq and Afghanistan. But plenty of complications await them.

By Andrew Erickson & Gabe Collins for The Diplomat

February 21, 2012

A security vacuum is developing around Chinese workers overseas. The recent kidnapping of 29 Chinese workers in Sudan (where another worker was shot dead during the abduction) and 25 workers in Egypt has sparked a strong reaction in China. As a result, Beijing is looking to bolster consular services and protection for Chinese citizens working and travelling overseas. On the corporate side, private analysts are urging companies to do a better job of training employees before they are sent abroad. Yet with at least 847,000 Chinese citizen workers and 16,000 companies scattered around the globe, some of them in active conflict zones such as Sudan, Iraq, and Afghanistan, key projects and their workers are likely to require more than just an expanded consular staff to keep them safe.

It’s with an eye on this growing danger that new Chinese private security providers see a business opportunity. Shandong Huawei Security Group appears to be a leader among Chinese security providers, which thus far have predominantly focused on the country’s robust internal market for bodyguard and protective services. Huawei provides internal services, but in October 2010, opened an “Overseas Service Center” in Beijing. The company’s statement on the center’s opening explicitly cites the withdrawal of U.S. troops from Iraq, and the potential for a security vacuum to result, as key drivers of its decision to target the Iraq market.

Chinese investors are rapidly increasing their presence in Iraq. China National Petroleum Corporation (CNPC), for example, is helping to develop oil projects that will likely substantially eclipse its flagship Sudan operations in size, while Chinese construction companies are also likely to play a central role in rebuilding and improving the country’s civil and energy-related infrastructure, destroyed by years of war and neglect.

Shandong Huawei and other emerging Chinese security providers will also likely target the Afghan market. The U.S. government’s latest geological survey showed massive mineral potential in Afghanistan, with reserves of lithium, copper, cobalt, iron ore, and other minerals potentially worth as much as $1 trillion. Chinese mining and construction companies are likely to move aggressively into Afghanistan, following the example of state-owned Metallurgical Corporation of China, which is developing the massive Aynak copper deposit.

The Aynak project has benefitted from the close proximity of troops from the U.S. Army’s 10th Mountain Division, but as Washington strives to pull U.S. forces out of Afghanistan by 2014, Chinese miners will increasingly be on their own for security. As the growing number of Chinese companies and workers in Iraq and Afghanistan are forced to adapt to an environment without large U.S. military forces effectively providing a shield for their operations, the heightened security risks from insurgent attacks, banditry, and other physical threats are likely to drive them to seek new armed security providers – precisely the business opportunity that Shandong Huawei and its peers seek.

Filling the Void

The first known attempt to create a foreign-focused private security firm in China came in 2004, when a Ningbo businessman created a bodyguard firm alleged to have drawn staff from China’s special forces community and the paramilitary People’s Armed Police (PAP). In contrast, Shandong Huawei’s venture into the Iraq security market appears to be both larger-scale and focused. On its website, the company says it recruits its personnel from among retirees of special police and military units and the PAP. Huawei also specifically notes that its employees include men who have served tours in Iraq, likely former PAP who guarded China’s Ambassador to Iraq.

As far as we know, there are no other Chinese security firms publicly declaring a desire to protect Chinese businesses working abroad. Nonetheless, if Shandong Huawei’s efforts to generate business in Iraq succeed, it’s likely that more Chinese firms will target the overseas market, particularly since the domestic private security market is becoming increasingly crowded.